IFA Research
The £100 billion IFA channel to market
So you think you need IFAs as a route to market for your properties. In theory this sounds logical - after all, don't they look after the High Net Worth individuals who are desperate to find better performing investments than those in the UK? So therefore IFAs must be desperate to talk to developers and agents? Or perhaps not.
First, let's look at the reality. Recent research commissioned by the Overseas Property Webshow (owned by FPL Webshows) and undertaken by NMG Group suggested that less than 10% of IFA's currently advise their clients to invest in overseas property. However, over the next 3 years a further 25% of IFAs would expect to include it in their portfolio recommendations. So a definite swing is expected - there's hope yet.
So why are IFAs not rushing into this faster, why is your phone not jumping off the hook with enquiries and IFAs haggling huge commission deals with you?
Firstly not all IFAs work on a commission basis. Some charge for their time and expertise and very often these are the guys who really do the serious business for the high value investors. These IFAs are also very intelligent and know all the right questions to ask, so if you want to talk to them, forget marketing bullshit, you need real facts and answers to every searching question - these guys will be diligent in their research. And according to our research, this is two-thirds of the IFAs!
Secondly what about the commission-led IFAs? Two-thirds of this group indicated that commission levels of less than 3% would be considered fair against an introduction only on a €100K European property.
Third, the reality is that the vast majority of developers and agents have yet to develop a proper IFA strategy, an effective mechanism to allow IFAs to track cases or to tackle their concerns such as client protection, introducer marketing materials, specific web site areas and all the components that demonstrate commitment to this channel.
So just how big is this channel? The last numbers I heard from a credible source suggested there were around 15,000 active IFAs in the UK and of these one third do the really serious business, one third make a living, and one third are changing course or about to retire. So there are really only 10,000 active IFAs of which 5,000 are the ones (often the younger ones) you need to talk to.
To use the IFA channel at all presents many challenges; lack of regulation and standards in the overseas property industry, recent UK financial services bad press, naïve approaches by developers and agents, a mistrust of the financial services industry by the general public…I could go on. BUT the IFA/intermediary channel is a big pot worth £100 billion per year as a channel and is swinging very slowly to encompass overseas property, albeit at relatively modest levels.
Reaching into this channel effectively is difficult. I suggest that to use it is a strategic decision by a company willing to invest time and resources into a long term channel education program and able to demonstrate track record, integrity and the ability to effectively, professionally and transparently service introduced clients. To see how it's done look at the UK financial institutions who have entire teams and departments focused on IFA relationships and support. And then find a strategic partner with knowledge and access to the channel and be prepared to spend serious money on long term awareness.
FPL Webshows has been working in this channel for 5 years; it's tough, it's overloaded with paperwork and regulation, has a variable reputation and getting attention needs dedication and patience. It took us 4 years to build our database and establish credibility through the IFA Webshow (the equivalent for IFAs of the Overseas Property Webshow for developers and agents) and we had the support of some 10 trade associations, many blue-chip financial service companies and industry press. There's no short cuts, whatever anyone says or tries to sell you on.
But it's a big pot of gold if you can get it right.
Neil Hutchinson is managing director of FPL Webshows who run both the IFA Webshow and Overseas Property Webshow - industry online exhibitions.